Proctor & Gamble Co. v. Evatt

• Decision Date: 22 December 1943
• Docket Number: 29579.,29578
• Citation: 52 N.E.2d 517,142 Ohio St. 369
• Court: Ohio Supreme Court
• Parties: PROCTER & GAMBLE CO. v. EVATT, Tax Com'r.

52 N.E.2d 517

142 Ohio St. 369

PROCTER & GAMBLE CO. v. EVATT, Tax Com'r.

Nos. 29578, 29579.

Supreme Court of Ohio

December 22, 1943

Syllabus by the Court.

Where an Ohio corporation has district offices outside Ohio, in charge of district managers who perform all administrative duties connected with such offices, supervise the selling and delivery of merchandise and collect therefor, deposit in banks in the respective districts funds arising from accounts receivable resulting from such sales, have authority to accept drafts on such bank accounts, and can and do apply such deposits on the expenses and needs of the district offices, such accounts receivable and the avails thereof are used in business in other states and arise out of business conducted in such other states, for and on behalf of the Ohio owner, and are exempt from taxation in Ohio under Sections 5328-1, 5328-2 and 5325-1, General Code, although checks covering the expenses of the district offices are forwarded to the company treasurer for his signature, and funds are withdrawn to Ohio after the expenses of the district offices have been satisfied.

Appeals from Board of Tax Appeals.

Two appeals have been filed in this court by the Tax Commissioner of Ohio from orders of the Board of Tax Appeals modifying two tax assessments for the years 1939 and 1940, made by the commissioner against The Procter & Gamble Company, of Cincinnati, an Ohio corporation.

The present controversy involves specifically the taxable situs of the accounts receivable and credits of the several district offices, located outside of Ohio, of the Procter & Gamble Distributing Company, a subsidiary of the appellee. The Tax Commissioner assigned an Ohio situs to all such items for the purpose of taxation, and the Board of Tax Appeals, on appeal by the taxpayer, reached a contrary conclusion.

Thomas J. Herbert, Atty. Gen., and Perry L Graham, of Columbus, for appellant.

Dinsmore Shohl, Sawyer & Dinsmore, of Cincinnati, Dargusch, Caren Greek & King, of Columbus, and Richard W. Barrett, of Cincinnati, for appellee.

ZIMMERMAN Judge.

In the consolidated returns filed for the year 1939, the taxpayer listed as Ohio taxable credits the sum of $4,745,938, with no claim for any deduction; and in the return filed for the year 1940, $6,104,690 was listed, with no claim for deduction. Taxes were paid computed on such valuations.

(In the stipulation of facts submitted to the Board of Tax Appeals it was agreed, provided the same were determined to be relevant and material, that if a foreign situs were accorded the accounts receivable of the Procter & Gamble Distributing Company's district offices outside Ohio, the Ohio taxable credits actually would be $4,467,026 for the year 1939 and $5,632,398 for the year 1940.)

After an audit, the commissioner resolved, under his interpretation of the controlling statutes, that the Ohio taxable credits were $11,336,970 for the year 1939, and $14,161,253 for the year 1940, and assessed taxes on such basis. Thereupon, appeals as indicated were taken by the Procter & Gamble Company to the Board of Tax Appeals, resulting in a modification fixing the amounts taxable in accordance with the listings of the taxpayer in its returns.

Section 5328-1, General Code, provides: '* * * Property of the kinds and classes mentioned in section 5328-2, of the General Code, * * * and all such property of persons residing in this state used in and arising out of business transacted out of this state by, for or on behalf of such persons, * * * shall not be subject to taxation. * * *'

Section 5328-2, General Code, recites:

'Property of the kinds and classes herein mentioned, when used in business, shall be considered to arise out of business transacted in a state other than that in which the owner thereof resides in the cases and under the circumstances following:

'In the case of accounts receivable, when resulting from the sale of property sold by an agent having an office in such other state or from a stock of goods...